MedCath shares rise on as Citi lifts 2008 outlook

The stock gained $1.59, or 8.3 percent, to $20.77 in afternoon trading. Shares have traded between $16.09 and $34.61 over the last 52 weeks.

Taylor increased his 2008 earnings-per-share forecast to $1.20 from 96 cents, but maintained a "Sell" rating on the company, citing several risks. Analysts polled by Thomson Financial expect profit of $1.11 per share.

"MedCath struggles to reduce volatility in its results as it embarks on an attractive long-term bed expansion strategy," he said, in a note to investors.

The company has missed its own guidance each of the last two quarters, he said, though it topped the most recent fiscal second-quarter projections.

Long-term issues for the company remain lingering bad debt, or accounts that are unlikely to be collected.

"Rising unemployment and deteriorating consumer credit are likely to drive collection rates still lower and bad debt expense higher," he said, in a note to investors. "The industry does not have a good track record of staying in front of declining collection rates."

Also, there has been a decline in certain heart procedures because of a downturn in drug-coated stent sales and issues surrounding implantable cardiac devices. Heart procedures are still the largest service line for the company, he said, and will continue to be a challenge.

Also on Monday, the Charlotte, N.C.-based company named Art Parker, current interim chief financial officer, to the new position of senior vice president of finance and development. The company is close to filling the CFO position, it said.